- CFA Exams
- CFA Exam: Level I 2021
- Study Session 8. Financial Reporting and Analysis (3)
- Reading 27. Income Taxes
- Subject 5. Recognition and Measurement of Current and Deferred Tax
CFA Practice Question
Which of the following statement(s) is (are) true with regard to deferred tax liability?
II. If the deferred tax liability is due to a temporary difference, it should be treated as debt.
I. If the deferred tax liability is not expected to reverse, it should be treated as equity.
II. If the deferred tax liability is due to a temporary difference, it should be treated as debt.
Correct Answer: I and II
User Contributed Comments 3
| User | Comment |
|---|---|
| gth763s | Temporary difference does not guarantee it will finally reverse. |
| o123 | debt = liability ... so yes, you'd treat the DTL as its named; a liability. |
| krisscfa | I. If the deferred tax liability is not expected to reverse, it should be treated as equity. If the Equipment becomes obsolete...treated as neither Debt nor Equity.... |